A major chapter in the saga of the crypto lending market’s 2022 collapse has officially closed. The Securities and Exchange Commission has agreed to dismiss its high-profile lawsuit against Gemini Trust Company, the exchange cofounded by twin brothers Cameron and Tyler Winklevoss, over its failed Earn program.
This decision, announced via a joint stipulation filed with a federal court, marks a significant victory for Gemini. The long-running case, initiated by the SEC in January 2023, centered on the argument that the crypto platform’s Earn program constituted an unregistered offer and sale of securities. However, the SEC’s move to dismiss the action “with prejudice”—meaning the agency cannot refile the same charges—was an exercise of its own discretion.
Focus on Investor Repayment
The main factor tipping the scales in Gemini’s favor was the full restitution to its Earn customers. The SEC’s filing explicitly cited the fact that Gemini Earn investors received a “100 percent in-kind return” of their crypto assets. For many of the approximately 340,000 investors impacted by the program’s failure, this return was critical.
The troubles began in November 2022, shortly after the collapse of the FTX exchange sent shockwaves through the digital asset world. Gemini Earn was a yield product that allowed users to loan their crypto assets to third-party borrower Genesis Global Capital in exchange for interest. When Genesis froze withdrawals, it locked up an estimated $900 million in customer assets. In the aftermath, the New York Attorney General’s office also secured a settlement from Gemini, recovering $50 million for more than 230,000 investors to ensure they received a full recovery of their assets.
The Genesis Connection
It is important to remember that the SEC’s original lawsuit targeted both Gemini and its partner, Genesis. While Gemini has now exited the legal battle with the regulator, Genesis’s financial woes continue to unfold. Genesis and two affiliates filed for Chapter 11 bankruptcy in January 2023. Genesis previously reached a settlement with the SEC in March 2024, agreeing to pay a $21 million civil penalty.
Crucially, that settlement stipulated that the penalty would only be paid after all other allowed claims, including those of the retail investors who lost access to their funds through the Earn program, were settled. The entire saga has been a painful lesson for the crypto industry, underscoring the severe risks that come with unregulated crypto lending products and the lack of essential disclosures for retail investors.
A Shifting Regulatory Tide?
The dismissal of the case against Gemini is the latest in a series of targeted closures by the SEC that has led some analysts to speculate about a broader shift in the regulatory climate for digital assets in the United States. While the SEC noted that this dismissal “does not necessarily reflect the Commission’s position on any other case” regarding crypto lending, the move offers a notable reprieve for one of the industry’s most established companies and is likely to be viewed as a sign of thawing relations between Washington and the digital asset world.
For the Winklevoss twins, who fought fiercely for the repayment of their customers, this dismissal marks a triumphant end to a significant legal threat and a critical step in their company’s efforts to put the tumult of the 2022 “crypto winter” firmly in the past. It also reinforces the principle that ensuring investors are made whole is a powerful mitigating factor in the eyes of federal regulators.